Judgment: approved by the Court for handing down
(subject to editorial corrections)
Ref:	CARC3427 

Delivered:	15.06.2001

 IN HER MAJESTY’S COURT OF APPEAL IN NORTHERN IRELAND

_____ 

BETWEEN

KATHLEEN O’HAGAN

						(Plaintiff) Appellant

and

JAMES WRIGHT

							(Defendant) Respondent

_____ 

CARSWELL LCJ 

	This appeal comes before us by way of a case stated by Nicholson LJ, arising out of his decision given when sitting in the High Court on appeal from a decree in the appellant’s favour for the sum of £565.30 given by a deputy district judge in the District of Armagh and South Down.  On appeal Nicholson LJ reduced the decree to £100.00, and on the appellant’s request stated a case for this court on a number of questions of law.  It is the first case before us in which the enforceability of the contractual arrangements known as accident car hire agreements has been tested.
	On 14 July 1998 the appellant was driving her Renault Clio car at Battlehill Road, Portadown, when the respondent drove a tractor out of a field on to the road and collided with the appellant’s car, causing it extensive damage, in consequence of which it was written off.  It was agreed that the accident was caused solely by the negligence of the respondent.  The appellant required the use of a replacement vehicle from the time of her return to work later in July until such time as she should receive a payment from the respondent’s insurers which would enable her to replace the destroyed car.  Her insurance brokers advised her to make use of the services of C.R.A.S.H Services Ltd (in this judgment referred to as CRASH), which specialises in the hiring of vehicles on credit to persons whose own vehicles are out of use following road accidents.  She entered into an agreement with CRASH on its standard terms, a copy of which is annexed to this judgment.  Pursuant to the agreement CRASH provided the appellant with a car from 22 July 1998 (mistakenly said to be 27 July in the case stated) until 13 August 1998, a period of 22 days.  No issue was raised before us about the propriety of the length of hire or the grade of car, and it was assumed for the purposes of the appeal that it was reasonable for the appellant to hire the car for the period stated. 
The material provisions of Part A of the agreement are Clause 2, whereby CRASH agreed to provide a temporary replacement vehicle for the reasonable duration of repairs or other period of unroadworthiness, and Clause 3, whereby it agreed to extend credit, subject to Clauses 8 and 10 of Part B, in respect of the repair and hire charges, “until these have been recovered from the party at fault in the above accident”.
	By Clause 2 of Part B CRASH was authorised to appoint a solicitor to act on the appellant’s behalf to recover all losses arising from the accident, the appellant being responsible for payment of all legal fees and expenses.  There followed several provisions designed to give CRASH control of the recovery of its hiring charges and repair outlay.  Clause 8 provided:
“Interest @ 2.5% per month shall be charged on outstanding Invoices which remain unpaid after 30 days from the date of Invoice.”

Clause 10 read:
“If the Solicitor finds it necessary to issue legal proceedings against the party at fault or the Invoices are outstanding for 90 days then the client will, upon request by the Company discharge the liability by entering a loan arrangement with a clearing bank or other lender.”

	By a civil bill issued on 19 November 1998 the appellant claimed the sum of £2500 from the respondent for loss and damage sustained by her by reason of his negligence.  On 11 February 1999 the deputy district judge gave a decree for £565.30 plus costs.  This amount was made up of an agreed sum of £100 in respect of the appellant’s excess on her motor insurance policy, together with 22 days’ hiring charges for the car obtained by the appellant from CRASH, which he reduced from £24 per day to £18 per day, plus VAT.  The respondent appealed to the High Court, and Nicholson LJ gave a reserved judgment on 5 September 2000, in which he reduced the decree to the sum of £100, representing the insurance excess.  He held that the sums provided for by the hiring agreement could not be recovered by CRASH from the appellant because of the terms of the Consumer Credit Act 1974 (the 1974 Act) and consequently could not be claimed against the respondent.
	The social utility of accident car hire agreements was discussed by Lord Mustill in Giles v Thompson [1994] 1 AC 142 in a passage at pages 154-5,          which it is worth repeating in full.  Referring to claims for loss of use of a car damaged in a road accident, he said:
“In principle, if such a claim is made it will often be quantified by reference to the cost of hiring a substitute vehicle, and will be recoverable upon proof that the motorist needed a replacement car whilst his own was off the road.  I say ‘if such a claim is made’ for two reasons.  First, because the loss of use is not recoverable under a comprehensive policy, so that there are no subrogated insurers to stand behind the claim, and in situations where there is no personal injury claim and where the damage to the motorist’s vehicle is dealt with as between insurers there are few motorists who will have the time, energy and resources to go to law solely to recover the cost of a substitute vehicle.  Secondly, because there are many motorists who lack the inclination or the ready cash to hire a substitute on the chance of recovering reimbursement from the defendant’s insurers.  Thus, there exists in practical terms a gap in the remedies available to the motorist, from which the errant driver, and hence his insurers, frequently profit.

In recent years a number of commercial concerns (hereafter ‘the companies’) have identified this gap and have sought to fill it in a manner advantageous alike to motorists and to themselves, by offering to motorists with apparently solid claims against the other parties to collisions the opportunity to make use of the company’s cars whilst their own are off the road.  The terms on which this opportunity is given are said to be, in broad outline, as follows.  (1) The company makes a car available to the motorist whilst the damaged car is under repair.  (2) The company pursues a claim against the defendant, at its own expense and employing solicitors of its choice, in the name of the motorist for loss of use of the motorist’s car.  (3) The company makes a charge for the loan of the replacement car, which is reimbursed from that part of the damages recovered by the motorist from the defendant or his insurers which reflects the loss of use of the motorist’s car.  (4) Until this happens the motorist is under no obligation to pay for the use of the replacement car.  (5) These arrangements are conditional on the co-operation of the motorist in pursuing the claim and any resulting legal proceedings.  (6) The companies aim to confine the scheme to cases where the motorist is very likely to succeed in establishing the defendant’s liability, without any contributory negligence on the part of the motorist.”

In Dimond v Lovell [2000] 2 All ER 897 at 912 Lord Hobhouse of Woodborough said of the schemes:
“The popularity of this scheme with the public is matched by its unpopularity with the main line motor insurance companies who are covering the negligent motorists against third party claims and find themselves faced with these increased claims.  They also have an increased incidence of loss of use claims because the scheme enables drivers, who otherwise would not go to the expense of hiring a substitute car, to hire one and make a claim for it.”

The present litigation is in reality a contest between CRASH and the respondent’s motor insurers about the validity of the claim to recover the hiring charges specified in the agreement in the instant case.  It is the latter’s contention that the charges are irrecoverable by CRASH from the appellant, by virtue of the provisions of the 1974 Act and the regulations made thereunder, and that in consequence the appellant cannot recover them as a valid head of claim in her proceedings against the respondent. 
	The 1974 Act contains a series of definitions, aptly described by Sir Richard Scott V-C in the Court of Appeal in Dimond v Lovell [2000] 1 QB 216 at 225 as interlocking, of agreements to which the Act applies.  It was not in dispute that the agreement was a consumer credit agreement within the meaning of section 8(2).  It was argued on behalf of the appellant that it was an agreement which provided  running-account credit, within the meaning of section 10(1)(a), rather than fixed-sum credit within section 10(1)(b).  Section 10(1) provides:
“For the purposes of this Act –

     (a)	running-account credit is a facility under a personal credit agreement whereby the debtor is enabled to receive from time to time (whether in his own person, or by another person) from the creditor or a third party cash, goods and services (or any of them) to an amount or value such that, taking into account payments made by or to the credit of the debtor, the credit limit (if any) is not at any time exceeded; and

     (b)	fixed-sum credit is any other facility under a personal credit agreement whereby the debtor is enabled to receive credit (whether in one amount or by instalments).”

We are unable to accept the appellant’s argument.  Nicholson LJ held, in a passage at page 6 of his judgment with which we agree, that the credit provided by the agreement was not a running-account credit but a fixed-sum credit:
“Professor Goode who has edited Consumer Credit Legislation states that a ‘running-account’ is the statutory equivalent of the more familiar expression ‘revolving credit’.  As defined it has two principal characteristics.  The first is that the creditor provides a facility or credit-line upon which the debtor may draw from time to time.  The second characteristic is implicit in the definition that there is a continuing facility or line of credit, whether the facility is opened for an agreed period or where no time-limit is agreed.  It follows, says Professor Goode, that it will be impossible at any given moment to predict how much credit the debtor will receive since this is determined by his decisions as to the use of the facility.  Having regard to the terms of the agreement which I have to construe, notably Clauses A3 and B10 I am not satisfied that there was a “running-account credit” and, therefore, for the purpose of the Act the credit is a fixed-sum credit.”

	Section 11(1) then provides:
“A restricted-use credit agreement is a regulated consumer credit agreement –

     (a)	to finance a transaction between the debtor and the creditor, whether forming part of that agreement or not, or

     (b)	to finance a transaction between the debtor and a person (the ‘supplier’) other than the creditor, or

     (c)	to refinance any existing indebtedness of the debtor’s, whether to the creditor or another person,

and ‘restricted-use credit’ shall be construed accordingly.”

It was suggested that the agreement was governed by section 11(1)(c), but we do not consider that this could be regarded as a refinancing transaction, and hold that it came within section 11(1)(a).  It therefore constitutes a “debtor-creditor-supplier” agreement within the meaning of section 12(a).
It was argued on behalf of the appellant that the agreement was exempt from regulation under the 1974 Act, because it fell within one of the categories of agreement specified in the Consumer Credit (Exempt Agreements) Order 1989 (the 1989 Order) made by the Secretary of State in exercise of the power conferred on him by section 16.  We shall discuss this submission later in this judgment.
 	Section 61 defines when an agreement is properly executed for the purposes of the Act.  It must, inter alia, be in the form prescribed by regulations made by the Secretary of State under section 60 and embody all the terms of the agreement, except implied terms.  It was common case that the agreement in the present case did not comply with the requirements of Schedule 1 to the Consumer Credit (Agreements) Regulations 1983 (the 1983 Regulations), in which the requirements for proper execution are specified.  
	Sections 65(1) and 127(3) are of central importance in the present case.  Section 65(1) provides:
“An improperly-executed regulated agreement is enforceable against the debtor or hirer on an order of the court only.”

Section 127(3) is in the following terms:
“The court shall not make an enforcement order under section 65(1) if section 61(1)(a) (signing of agreements) was not complied with unless a document (whether or not in the prescribed form and complying with regulations under section 60(1)) itself containing all the prescribed terms of the agreement was signed by the debtor or hirer (whether or not in the prescribed manner).”

The relevant terms are prescribed by Regulation 6(1) of the 1983 Regulations for the purposes of section 127(3) and contained in Schedule 6, which requires to be set out as a whole:
“SCHEDULE 6                                                                                                                              Regulation 6(1)
PRESCRIBED TERMS FOR THE PURPOSES OF SECTIONS 61(1)(A) AND 127(3) OF THE CONSUMER CREDIT ACT 1974
___________________________________________________________________________
 	TYPE OF AGREEMENT					PRESCRIBED TERMS
   (1)							   (2)
___________________________________________________________________________
Amount of Credit

     1.	Restricted-use debtor-creditor-supplier		A  term   stating  the   amount  of  the  credit,  
agreements for fixed-sum credit –			which  may  be  expressed  as  the total  cash  
     (a)	to   finance   a  transaction   comprising 		price  of  the  goods,  services,  land  or other
	the    acquisition   of    goods,   services,		things,   the  acquisition  of   which  is  to  be
	land   or   other  things  specified in the		financed by credit under the agreement.
	agreement   or  identified   and  agreed		 
	on at the time the agreement  is  made;	
     (b)	under which the total amount payable 
by  the  debtor  is not  greater  than the 
total cash price; and
     (c)	under   which   there   is   no   advance 
payment.
     2.	Agreements  for  fixed-sum  credit  not		A term stating the amount of the credit.
falling within paragraph 1.
Credit limit

     3.	Agreements for running-account credit.		A term stating the credit limit or the manner 
						in which  it  will be determined or that there 					is no credit limit.

Rate of interest

     4.	Agreements for -				A term stating the rate of any interest on the 
	(a)   running-account credit; and			credit to be provided under the agreement. 
	(b)   fixed-sum  credit  falling within	
	        the    exceptions   in   paragraph
	        9(a) to (c) of Schedule 1 to these 
	        Regulations.

Repayments

     5.       Consumer credit agreements.	A term stating how the debtor is to discharge his obligations under the agreement to make the repayments, which may be expressed by reference to a combination of any of the following –
	     (a)   number of repayments;
	     (b)   amount of repayments;
	     (c)    frequency and timing of repayments;
	     (d)   dates of repayments;
                                                                                                          (e)   the manner in which any of the above may be determined.
	or in any other way, and any power of the creditor to vary what is payable.

     6.       Consumer hire agreements.	A term stating how the hirer is to discharge his obligations under the agreement to pay the hire payments, which may be expressed by reference to a combination of any of the following –
	     (a)   number of payments;
	     (b)   amount of payments;
 	     (c)   frequency  and  timing  of  payments;
 	     (d)  dates of payments;
	     (e)   the manner in which any of the above
 	            may be determined.
	or in any other way, and any power of the owner to vary what is payable.”
___________________________________________________________________________

The main planks of the argument advanced on behalf of the appellant were the following:
1.	The agreement was exempt under the 1989 Order.
2.	The agreement was one for running-account credit.  We have already dealt with this submission.
3.	The agreement complied with the requirements of Schedule 6 to the 1983 Regulations, in that 
(a)	the amount of the credit was sufficiently stated;
(b)	the rate of interest was stated;
(c)	there was a term stating sufficiently how the appellant was to discharge her obligations;
4.	 The debtor had consented to pay the hire charges and accordingly an enforcement order could be made pursuant to the provisions of section 173(3) of the 1974 Act .
 	Before we turn our attention to these submissions, we should refer briefly to the decision in Dimond v Lovell [2000] 2 All ER 297, in which the validity of an accident hire agreement was tested.  Both the Court of Appeal and the House of Lords held that the agreement under consideration could not be enforced against the hirer and so the sums provided for in the agreement could not be recovered against the other motorist.  The agreement was made by 1st Automotive Ltd and was broadly comparable with that in the present case, save that the hiring charges were not specified in the agreement when it was executed, but were calculated at the conclusion of the hiring and then entered into the agreement document.  It was argued unsuccessfully before the Court of Appeal, though the argument was not pursued before the House of Lords, that an agreement, if it constituted a consumer hire agreement, could not also be a consumer credit agreement.  Another argument based on trusteeship was rejected by the House of Lords.  It was held accordingly that the agreement, being a consumer credit agreement and not exempted by the 1989 Order, could not be enforced against the hirer, since it was not properly executed and did not comply with the requirements contained in Schedule 6 to the 1983 Regulations.  
The members of the House of Lords also expressed some views on the measure of damages which would be awarded where such an agreement did comply with the 1974 Act.  Three members considered that the hirer obtained more than the hiring of a car under the agreement, and that the charge reflected the inclusion of the extra services provided.  The value of those extra services should be deducted before determining the cost of the hire, which prima facie would be the spot rate for hiring a similar vehicle from an ordinary car hire company.  Lord Nicholls of Birkenhead did not share that view, and Lord Saville of Newdigate preferred to leave the question for future determination.  
	It was submitted on behalf of the appellant that the agreement was an exempt agreement under the provisions of paragraph 3(1)(a)(i) or (ii) of the 1989 Order, which provide as follows:
“     3.-(1)   The Act shall not regulate a consumer credit agreement which is an agreement of one of the following descriptions, that is to say –

    (a)   a debtor-creditor-supplier agreement being either –

	     (i)   an agreement for fixed-sum credit under which the total number of payments to be made by the debtor does not exceed four, and those payments are required to be made within a period not exceeding 12 months beginning with the date of the agreement; or
	     (ii)  any agreement for running-account credit which provides for the making of payments by the debtor in relation to specified periods and requires that the number of payments to be made by the debtor in repayment of the whole amount of the credit provided in each such period shall not exceed one;

not being, in either case, an agreement of a description specified in paragraph (2) below; and in this sub-paragraph, ‘payment’ means a payment comprising an amount in respect of credit with or without any other amount.”

Our conclusion that this was not an agreement for running-account credit means that the case does not fall within paragraph 3(1)(a)(ii).  Nor do we consider that it falls within paragraph 3(1)(a)(i).  The only provision for payment is that contained in Clause 10 of the agreement.  Whatever that provision means – which we shall discuss later in this judgment -- it does not provide for more than one payment, so that the first requirement is satisfied.  But it cannot be said that that payment, if such be stipulated by clause 10, is required to be made within the period of twelve months beginning with the date of the agreement.  It depends on a number of contingencies, which may or may not occur within that period – indeed, it was not suggested in the present case that the appellant had even yet been called upon by CRASH to pay them the hiring charges.
	That leaves the argument based on compliance with the terms of Schedule 6 to the 1983 Regulations.  In our opinion the agreement came within paragraph 1 of the Schedule, as constituting a restricted-use debtor-creditor-supplier agreement for fixed-sum credit to finance a transaction comprising the acquisition of services specified in the agreement.  It then had to contain a term stating the amount of the credit, which might be expressed as the total cash price of the services.  It was argued on behalf of the appellant that this was satisfied by the inclusion of the daily cost of the car hire, from which the hirer would know exactly how much she had to pay when the hiring was completed.  The opposite argument was advanced on behalf of 1st Automotive Ltd in the Court of Appeal in Dimond v Lovell, that it was not possible to state the final amount of the car hire charges until it was known how long the hiring would last, and accordingly the agreement could not have the protection of the 1974 Act.  Sir Richard Scott V-C met that argument at page 233 of his judgment in the following passage:
“But the daily rate of hire would be known and an estimate of the period of hire could be obtained from the garage that was repairing the damaged vehicle.  In these circumstances paragraph 2(2) of the Regulations of 1983 would, as I read it, apply and would have allowed 1st  Automotive to insert an estimate of the amount of credit with an indication of the assumptions on which the estimate was made.  I do not accept that 1st Automotive could not have complied with the Regulations.”

We would respectfully question the validity of such an expedient in relation to compliance with Schedule 6.  Paragraph 2(2) of the 1983 Regulations reads as follows:
“     (2)   Where any information about financial and related particulars set out in paragraphs 9 to 11 of Schedule 1 to these Regulations cannot be exactly ascertained by the creditor, estimated information based on such assumptions as the creditor may reasonably make in all the circumstances of the case and an indication of the assumptions made shall be included in documents embodying regulated consumer credit agreements.”

It may be seen accordingly that that provision applies to compliance with Schedule 1, and we do not readily see how it could be invoked in respect of compliance with Schedule 6.  
We prefer an approach which has been adopted in some decisions in lower courts in England, to the effect that where the total hire charge payable can be ascertained by calculation from the figures in the agreement, that sufficiently states “the amount of credit”: we were referred in particular to the judgment of Judge Oliver-Jones QC given on 14 February 2001 in Nottingham County Court in Howarth v Nixon and Pritchett; and cf Dobson, Consumer credit and human rights, NLJ December 8 2000, page 1816.  One of the main objects of the 1974 Act is to ensure that there are no hidden charges and that the debtor knows where he stands.  If he knows precisely how much per day the car hire charge will be, then he can calculate his liability exactly when he knows the length of the hiring, which will commonly be only when he gets his repaired car back on the road.  The old legal maxim Id certum est quod certum reddi potest is both good sense and good law.  We should accordingly be prepared to hold that the amount of the credit has been sufficiently stated.
	It is necessary then under paragraphs 5 and 6 of Schedule 6 for the agreement to contain a term stating in some way how the debtor is to discharge his obligations, and it is clear from the wording of these paragraphs that the debtor must receive fairly precise information about the times and amounts of repayments to be made.  We do not consider that the terms of the CRASH agreement can be said to comply with this requirement.  Clause 8 does not stipulate any date for repayment.  Clause 10 does not provide in terms for repayment, merely that on receipt of a request from CRASH when proceedings are issued or the invoices are outstanding for 90 days, the debtor will “discharge the liability by entering a loan arrangement with a clearing bank or other lender”.  The clause does not say what is to happen if the debtor cannot obtain such a loan, and we do not think that there is a necessary implication that he is to pay off the moneys due to CRASH in such an event.  We therefore hold that the terms of Schedule 6 have not all been complied with.
	The final argument advanced on behalf of the appellant was that the debtor must be taken to have consented to the enforcement of the agreement by the court, since she had included the sums due to CRASH as part of her claim, and therefore by virtue of section 173(3) of the 1974 Act it could be enforced.  Section 173(3) provides:
“     (3)   Notwithstanding subsection (1), a provision of this Act under which a thing may be done in relation to any person on an order of the court or the Director only shall not be taken to prevent its being done at any time with that person’s consent given at that time, but the refusal of such consent shall not give rise to any liability.”

It may be debatable whether the inclusion of the charges in the claim is sufficient evidence of consent, in the light of Clause B4 of the CRASH agreement, which provides:
“The Solicitor will have sole conduct of the claim and any litigation arising from it subject to the Client’s instructions and the Client shall co-operate fully with the Solicitor including attendance at court if necessary to ensure the rapid and satisfactory payment of the Company’s charges.”

There is, however, a more fundamental objection.  By virtue of section 127(3) the court is not to make an enforcement order unless the agreement satisfies the requirements of Schedule 6 to the 1983 Regulations, and accordingly the payment which CRASH seeks cannot be made “on an order of the court”.  The necessary condition contained in section 173(3) is therefore not satisfied, and the appellant’s consent would not in our opinion make it possible for an enforcement order to be made.  The submission based on this point accordingly fails.  
The consequence of our conclusions is that by virtue of section 127(3) the court cannot make an enforcement order under section 65(1).  The further consequence is that the agreement is unenforceable in its present form against the appellant and accordingly the amount provided for in the agreement cannot form part of the damages payable by the respondent to the appellant.  That may appear to base a considerable conclusion on a narrow point and to bear harshly on CRASH, who are providing a commercially convenient and socially useful service to motorists involved in road accidents.  We would point, however, to two statements of policy made in Dimond v Lovell in the House of Lords.  Lord Hoffmann said at page 908:
“The policy of the Act is to penalise 1st Automotive for not entering into a properly executed agreement.  A consequence is often to confer a benefit upon the debtor, but that is a consequence rather than the primary purpose.”

Similarly Lord Hobhouse of Woodborough said at page 914:

“It may be thought that this may sometimes produce a harsh result and an unmerited windfall for the debtor.  But this is what Parliament has provided no doubt in accordance with a broader policy.”

	The questions of law posed in the case stated were as follows (we have deleted the word “not” in questions 2 and 3, where it had been mistakenly interpolated):
“Whether I was correct in law in holding that:-

1.	I was correct in law in holding that the CRASH Services agreement, the subject matter of the Civil Bill Appeal, was not a ‘running account credit’ agreement within the meaning of Section 10(1)(a) of the Consumer Credit Act 1974.

2.	Whether I was correct in law in holding that the CRASH Services agreement, the subject matter of the Civil Bill Appeal, was a ‘restricted use credit’ agreement within the meaning of Section 11(1) of the Consumer Credit Act 1974.

3.	Whether I was correct in law in holding that the CRASH Services agreement, the subject matter of the Civil Bill Appeal was a ‘debtor-creditor-supplier’ agreement within the meaning of Section 12 of the Consumer Credit Act 1974.

4.	Whether I was correct in law in holding that the CRASH Services agreement, the subject matter of the Civil Bill Appeal, was not an ‘Exempt Agreement’ within the meaning of Article 3(1) of the Consumer Credit (Exempt Agreements) Order 1989.

5.	Whether I was correct in law in holding that the CRASH Services agreement, the subject matter of the Civil Bill Appeal, did not satisfy the requirements of Section 61(1) of the Consumer Credit Act 1974.

6.	Whether I was correct in law in holding that the CRASH Services agreement, the subject matter of the Civil Bill Appeal, was not enforceable pursuant to Section 127(3) of the Consumer Credit Act 1974.

7.	Whether I was correct in law in holding that the CRASH Services agreement, the subject matter of the Civil Bill Appeal, was irredeemably unenforceable and void.

8.	Whether I was correct in law in holding that the Plaintiff had suffered no loss through obtaining a replacement vehicle from CRASH Services.

9.	Whether I was correct in law in holding that the CRASH Services agreement, the subject matter of the Civil Bill Appeal, was not enforceable pursuant to Section 173(3) of the Consumer Credit Act 1974.”

We answer each of the questions in the affirmative and dismiss the appeal.

IN HER MAJESTY’S COURT OF APPEAL IN NORTHERN IRELAND

_____ 

BETWEEN

KATHLEEN O’HAGAN

						(Plaintiff) Appellant

and

JAMES WRIGHT

							(Defendant) Respondent

_____ 

JUDGMENT

OF

 CARSWELL LCJ

_____